Harley Davidson’s Study in Terms of Strategy Management

Identify Harley- Davidson’s strategy and explain its rationale

Harley Davidson opted to follow a Differentiation Strategy, fact that becomes evident since everybody knows that acquiring a Harley means much more than just having a motorbike. But let us go deeper in this. What is it understood by a Differentiation Strategy? Obeying to Michael Porter’s model, firms can follow two types of business strategies in order to fight against the competitive forces (threat to substitutes, buyer power, supplier power, rivalry and barriers to entry):

• Cost Leadership
• Differentiation

While the first one is focused on offering the product at the lowest possible cost, the second one pursuits developing and adopting a system that leads the customer to see its product as something different and unique. In this scenario, it becomes obvious than Harley’s brand implies more than having a vehicle; it represents a way of life. But how has this business been possible? Harley’s design tries to represent the American dream, freedom, adventure… If it would be made an interview to a general biker, they would affirm that Harley’s owners are not the typical bikers, it is more than that.

They pretend to show a kind of elegance and respect for the American world, they are very centered on maintaining and promoting a very personal relationship with the customer, in order to make them be seen as different. It is worth mentioning that one key factor for a differentiation success is the brand loyalty from the customer. In this sense, Harley Davidson decided to create Harley Owners Group (1983), in order to make their customers participate and comment their experience.

It must not be forgotten the interesting fact that Harley’s investment is much lower than its competitors, and as a result, Harley’s engines are a good example of technological backwardness. On the contrary, this technological backwardness represents per se an issue which is quite valued by the costumer and consequently, that creates value for the company. And not everything is about backwardness, since Harley plays an essential role in product development. As an example, in 2006 Harley offered a huge quantity of models, from which 7 were finally chosen and developed.

In addition to this, it must be commented that the firm has made a strong effort by researching in order to acquire cost advantage, and as a result, they were able to accelerate the technological progress and to develop new products. To sum up, Harley’s strategy is focused on the idea that each biker should have a personal, unique bike which will difference him from the others. This dream is highly ambitious, and the way of achieving it is not offering millions of models, but providing a wide range of ways for customizing the product.

Compare Harley Davidson’s resources and capabilities with those of Honda

What does your analysis imply for Harley’s potential to establish cost and differentiation advantage over Honda? Apparently, Harley had cost disadvantage in comparison to Honda, due to their low production volumes and components. However, they could compensate it by keeping close relationships with their key suppliers and placed purchasing at senior levels within their management structure. H&D, rather than competing against Honda, kept on supplying a “unique Harley experience”.

As they were already consolidated in the USA, they adopted as a growth strategy the decision to expand themselves to Europe, since Europe is the second largest heavyweight market in the world. In this sense, exporting to Europe meant taking market share from other firms as well as expanding their product range, and therefore, they burst into direct competition with other producers. One clear indicator of direct competition was the beginning of the Harley imitations.

For example, V-twin cruiser styled closely along the lines of classic Harleys, at lower prices and with a more developed technology. The key advantage for Japanese firms was mainly their sales volume: Honda has an average production volume of 5K motorbikes per year. In addition to this, Honda was one step ahead Harley because the second one has no diversification, while Honda is an important automobile producer, and so, they can share technology, engineering resorts and research for both divisions.

One key factor for H&D to establish cost a differentiation advantage was the idea of synthesizing Harley’s comfort and style with the typical attributes of sport motorbikes. They opted to develop this idea through Buell, a firm they incorporated in 1998. As a result, they performed models with lighter weights and superior handling and acceleration, so they were considered optimal for younger cyclers as well as for the European market, where riders tend to give more importance to sporty designs rather to classic ones. And cheaper price tags.

To conclude, it must not be forgotten to mention H&D interest in creating a new kind of relationship between managers and employers. They proposed the creation of an employee commitment and job satisfaction. In addition to this, the idea of a nonhierarchical structure, as well as team-based, and the possibility of accelerating innovation become being evident through all sectors of the firm.

What threats to continued success does Harley-Davidson face?

As everybody knows, the main problem that threatens H&D is imitation. But how can they solve it? One possibility could be maintaining a competitive position, but there can be proposed some other ones, such as selling experiences instead of selling products, but this option would arise the problem of depending on the social and psychological identity and aspirations of the customers, which can be quite risky.

How can Harley-Davidson sustain and enhance its competitive position?

There are several ways of sustaining and enhancing their competitive position. Let us propse some of them:

1. Adapt its products, its image and its customer approach to overseas markets.
2. Changing their image. However, this could be very risky, as one of the key factors of differentiation strategy for H&D is precisely their image
3. Investing Researching, developing, acquiring new sectors… could represent wonderful ideas in continue being in the limelight.
4. Increasing selling volume and reducing costs By then, the margins would grow.
5. Strong marketing skills Nothing better than persuading the customer to talk about the firm.
6. Building some new headquarters
7. Focusing in attracting creative people The more innovation and ideas, the more opportunities to develop and keeping the competitive position.
8. Cooperating successfully with distribution channels It could be the best way to sell the product.
9. R&D Nowadays, it is known that one of the things that created more value is having a good division of R&D which will give a lot of importance to the innovation and the improvement.
10. Increasing margins H&D has expanded a lot their production capacity, so they can change their balance of supply and demand.
11. Selling the key differentiation facts It could be essential to make the customer understand the importance of the differentiation points that H&D can provide.
12. Focusing on effective engineering skills